Flash report on expected tax changes

On 16 October 2024, the draft changes to the tax laws for 2025 were published. As a result of the public consultation, fine-tuned rules will be finalized in November, which we will report to you in a separate newsletter. In this flash report, we summarise the most important points of the draft package.

By amending tax laws, among other things, relief of personal income tax, new measures to whiten the economy, administrative reduction, and harmonization of EU legislation have been facilitated.

Family tax deduction

The amendment aims to noticeably improve the situation of families raising children in the coming years; therefore, the tax allowance for children would be doubled in two stages, with deadlines of 1 July 2025 and 1 January 2026. The annual amount of tax relief remaining with families may exceed HUF 650 billion with the measure.

Depending on the number of dependents, the amount of family tax allowance enforceable in personal income tax is expected to increase in two stages, according to the draft, as follows.

Phase-out of social contribution tax relief

The social contribution tax allowance for labour market entrants is planned to be phased out, as it no longer fulfils its incentive role.

Extra-profit taxes and special sec-toral taxes

Next year, an even higher transaction fee is expected, as the draft legislation would abolish the duty exemption for bank transactions initiated through the Post Office Clearing Centre.

The draft also shows that sectoral extra-profit taxes are still not expected to be phased out in 2025 and would remain in force.

Global minimum tax

The global minimum tax law would undergo technical changes, and amendments are expected regarding the determination of the UTPR percentage allocated to Hungary and the additional tax surplus payable in the given state.

Local taxes

Based on the draft, the state tax authority will provide daily data electronically to local governments on taxpayers established in the territory (having their registered office or establishment in their jurisdiction).

Value added tax

There are also many changes in VAT in minor or major of significance.

The draft law leaves intact the current HUF 12 million threshold for small taxpayer exemption. However, clarifications are expected in the EU small taxpayer exemption rules. According to the regulation applicable to small businesses, individual tax exemption can currently only be granted to companies established in a given Member State, which has a restrictive effect on competition at EU level, so the 2016 EU VAT Action Plan aims to settle this market imbalance, the details of which are expected to enter into force at EU level from 2025.

The possibilities of exemption from value added tax insurance obligations for taxable persons who do not owe money to customs and are not being liquidated are also clarified.

Small Business Tax (KIVA)

According to the plan, KIVA companies could transform without losing their small taxpayer status. In the event of a merger or division at book value, it would be possible to reactivate KIVA by opting it with the NAV within 15 days, provided that the conditions for the emergence of small business taxpayer status continue to be met.

Paying hospitality

In future, private individuals engaged in paying hospitality (providing chargeable accommodation) activities would be able to opt for itemised flat-rate taxation for up to three properties. These can be properties owned or usufructed by up to three that qualify as private accommodation under the Trade Act.

Excise duty changes

The Act on Excise Duty is also amended on a number of points, including the definition of fuels and the possibility of reclaiming diesel used by farmers. A new rule for rail transit companies is the reimbursement of electricity tax.

Changes to accounting

In line with EU directives, company size criteria and certain financial limits will be amended. Audit thresholds are also expected to increase: the current revenue threshold is planned to increase from HUF 300 million to HUF 600 million.

Sustainability reporting obligations will also be broadened soon. Companies subject to reporting requirements should choose an auditor with sustainability certification. We confirm that LeitnerLeitner will be gladly to assist its Clients in this area as well.

In the future, the conditions for the legality supervision procedure will also become stricter. If a company fails to comply with its disclosure obligations, anyone will be able to initiate this procedure.

Changes in tax procedures

The competence of the Hungarian Tax Authority will be strengthened in a number of areas, including the tightening of control measures and the extension of information access. Furthermore, procedures related to payment discounts above HUF 1 billion will be centralised in the hands of the Central Management as a superior body. The HTA will also be given new tasks in the field of road freight transport control, metal trade and cash controls entering or leaving the EU.

The current draft law is in the phase of public consultation, so the details are subject to change.